The car rental conglomerate Avis Budget Group (Nasdaq: CAR), has announced that it will purchase Zipcar (Nasdaq: ZIP) today. The current offer is $12.25 per share, which makes the total value of the deal approximately $500 million. The offer price is actually a 49% premium on the current share price of the Zipcar stock.
Zipcar made it’s name by being the first major “car sharing” company. This pricing model works very well in densely populated cities like San Francisco and New York. The renter can rent the car for exactly the amount of time they need to and then drop it back off at any Zipcar location.
With over 760,000 members, Zipcar’s revenues are growing rapidly. Zipcar’s 10,000 vehicles are placed in urban areas and college campuses. In 2011, they generating approximately $241 million in gross revenue. Their last 10-Q filing stated they were already at $208 million by the close date of September 30th. Analysts are saying the car sharing market is $400 million plus industry.
Avis expects to save between $50 million and $70 million through synergies in operations, maintenance, and financing. Their CEO Ronald Nelson believes that Zipcar is “highly complementary to traditional car rental.” Moreover, he expects the merger to capitalize on Avis Budget’s experience and Zipcar’s technology.
They have hired Citigroup to be their financial adviser, while Morgan Stanley will guide Zipcar. The completion of the transaction is still subject to approval by the Zipcar shareholders and other customary closing conditions. However, Zipcar’s board has already voted unanimously for it and they expect the process to be completed in the spring of 2013.